REPORT DIGEST UNIVERSITY OF ILLINOIS FINANCIAL AUDIT FOR THE YEAR ENDED JUNE 30, 2016 Release Date: February 16, 2017 FINDINGS THIS AUDIT: 3 CATEGORY: NEW -- REPEAT -- TOTAL Category 1: 0 -- 0 -- 0 Category 2: 1 -- 2 -- 3 Category 3: 0 -- 0 -- 0 TOTAL: 1 -- 2 -- 3 FINDINGS LAST AUDIT: 3 Category 1: Findings that are material weaknesses in internal control and/or a qualification on compliance with State laws and regulations (material noncompliance). Category 2: Findings that are significant deficiencies in internal control and noncompliance with State laws and regulations. Category 3: Findings that have no internal control issues but are in noncompliance with State laws and regulations. State of Illinois, Office of the Auditor General FRANK J. MAUTINO, AUDITOR GENERAL To obtain a copy of the Report contact: Office of the Auditor General, Iles Park Plaza, 740 E. Ash Street, Springfield, IL 62703 (217) 782-6046 or TTY (888) 261-2887 This Report Digest and Full Report are also available on the worldwide web at www.auditor.illinois.gov INTRODUCTION The University’s financial audit report consists of three sets of financial statements as follows – The financial statements of the University, and the revenue bond financial statements of the Auxiliary Facilities System and the Health Services Facilities System. This report contains only findings pertaining to the Financial Statement Audit. The State Compliance Examination and Federal Single Audit Reports will be issued at a later date. SYNOPSIS • (16-1) The University has not established adequate internal controls over accurately identifying and recording deferred expense transactions and reporting prepaid expenses at fiscal year- end for financial reporting purposes. • (16-3) The University has inadequate controls in place to monitor and maintain the accounts payable master vendor file. FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS CONTROLS OVER IDENTIFYING AND RECORDING TRANSACTIONS NEED IMPROVEMENT The University has not established adequate internal controls over accurately identifying and recording deferred expense transactions and reporting prepaid expenses at fiscal year-end for financial reporting purposes. In relation to our test work over expense transactions, we reviewed 225 cash disbursement transactions (totaling $66,416,080), 60 P-Card expense transactions (totaling $264,882), and 60 T-Card expense transactions (totaling $331,836) recorded during the fiscal year. We also reviewed 13 cash disbursements occurring subsequent to year-end (totaling $35,244,921). Additionally, we separately reviewed 12 internal journal voucher transactions recorded during the fiscal year (totaling $13,266,046 debits and $423,600 credits). In relation to our test work over revenue transactions, we reviewed 60 cash receipt transactions recorded during the fiscal year (totaling $47,087,045). During our review of these transactions, some of the items that were not recorded in the proper accounting period are as follows: • One general expense cash disbursement (totaling $4,157) that was recorded as an expense for fiscal year ended June 30, 2016, should have been fully accrued as of June 30, 2015 at an amount of $4,157. • One general expense cash disbursement (totaling $27,563) that was recorded as an expense for the fiscal year ended June 30, 2016, should have been partially deferred as of June 30, 2016 at an amount of $17,662, and then recognized as expense for the fiscal year ending June 30, 2017. • Three cash receipts (totaling $67,225) that were recorded as operating revenue for the fiscal year ended June 30, 2016, should have been partially accrued as of June 30, 2015 at an amount of $61,070. (Finding 1, Pages 5-6) This finding has been repeated since 2009. We recommended the University continue to review its process to assess the existence of current period revenues and expenses and consider changes necessary to ensure they are accurately identified and recorded for presentation in the University’s financial statements. University officials agreed with the finding. (For the previous University response, see Digest Footnote #1.) CONTROLS OVER MONITORING THE ACCOUNTS PAYABLE MASTER VENDOR FILE NEED IMPROVEMENT The University has inadequate controls over in place to monitor and maintain the accounts payable master vendor file. During our review of the University’s accounts payable master vendor file (with 144,071 total vendors), we noted there were 779 duplicate records representing 360 vendors. The vendors had the same name but were given different vendor identification numbers in the accounts payable system. In addition, we noted 3,115 vendors without an employer identification number (EIN) listed and 105,938 vendors with no activity within the 3 previous fiscal years. University policies state vendors should have an EIN on file when creating the vendor to ensure the vendor is not fraudulent and vendors with no recent activity should be inactivated to ensure no inappropriate payments are made to outdated vendors. (Finding 3, page 9) We recommended the University review and implement stronger internal controls in order to monitor and maintain the accounts payable master vendor file. University officials agreed with the finding. OTHER FINDING The remaining finding is reportedly being given attention by the University. We will review the University’s progress towards implementation of our recommendations in our next engagement. AUDITOR’S OPINION Our auditors stated the financial statements of the University, the Auxiliary Facilities System and the Health Services Facilities System as of June 30, 2016, and for the year then ended, are fairly stated in all material respects. FRANK J. MAUTINO Auditor General FJM:tlk SPECIAL ASSISTANT AUDITORS Our Special Assistant Auditors for this audit were CliftonLarsonAllen. DIGEST FOOTNOTES #1 – Inadequate Procedures over Expense Deferrals and Other Cut-off Related Issues – Previous University Response Accepted. The University will continue to implement corrective actions to address the recommendation in this finding.